Judge: Stephen P. Pfahler, Case: 23STCV31057, Date: 2024-07-18 Tentative Ruling

Case Number: 23STCV31057    Hearing Date: July 18, 2024    Dept: 68

Dept. 68

Date: 7-18-23

Case #23STCV31057

Trial Date: Not Set

SPECIAL MOTION TO STRIKE

MOVING PARTY: Defendants, Topa Insurance Company, et al.

RESPONDING PARTY: Plaintiffs, Faramarz Massachi

RELIEF REQUESTED

Special Motion to Strike the Complaint

SUMMARY OF ACTION

Plaintiffs Faramarz and Mojgan Massachi allege a burst pipe caused significant water damage in their home, thereby leading to the submission of a claim to Defendants Topa Insurance Company and Hippo Analytics, Inc. The parties subsequently disputed the claim adjustment process which led to an appraisal hearing. The appraisal panel found in favor of Plaintiffs.  

On December 19, 2023, Plaintiffs file their complaint for 1. Breach of Contract; 2. Breach of the Implied Covenant of Good Faith and Fair Dealing; and 3. Violation of Bus. & Prof. Code, § 17200, et seq. Topa Insurance Company answered the complaint on January 22, 2024, and filed an amended answer on February 1, 2024.

RULING: Denied

Defendants Topa Insurance Company(Topa) and Hippo Analytics, Inc. (Hippo) move to strike limited portions of the introductory paragraphs, as well as the first, second, and third causes of action.[1] Defendants move on grounds that the identified allegations and claims arise from privileged and protected conduct. Plaintiff in opposition challenges the motion as relying on allegations not integral to the claim, thereby barring application of the statute. Plaintiffs also maintain a likelihood of prevailing on the merits even if Defendants shift the burden. Defendants in reply emphasize the reliance on the undisputed privilege conduct as integral to the claims, and therefore barred. Defendants also maintain Plaintiffs lack evidence of a probability of prevailing on the claim.

Timing

A special motion to strike must be filed within 60 days from service of the complaint (with an additional five days under Code of Civil Procedure section 1013(a) for service by mail), or at any later time that the court deems proper. (Code Civ. Proc., § 425.16, subd. (f).) The complaint was filed December 19, 2023. The December 26, 2023 filed proofs of service indicate personal service on both defendants on December 21, 2023. The instant motion was filed on February 16, 2024—57 days after service. The motion is timely.

Application of the Anti-SLAPP Statute

Defendants contend the complaint specifically arises from the allegations in the underlying complaint regarding the appraisal process. The appraisal process itself constitutes a protected activity under the litigation privilege. Hippo Analytics, Inc. also specifically notes that any separate and distinct conduct under the wrongful withholding of insurance benefits claim against Topa Insurance Company comprises a course of conduct without any direct nexus to the insurance based claims, and therefore barred.

In addition to citation to the complaint, Defendant Topa Insurance Company also submits a declaration in support, which the court can rely upon in determining whether moving party meets the threshold for shifting the burden in a special motion to strike. (Code Civ. Proc., § 425.16, subd. (b)(2); Stewart v. Rolling Stone LLC (2010) 181 Cal.App.4th 664, 679 [The court interprets the activities of the parties through the allegations in order to determine free speech activity but need not adhere to the strict form of the operative pleading in order to make such determinations].) Defendant offers the declaration in order to present the conclusions of the adjustment process, including the appraisal process. [Declaration of Kelly Yates.]

Plaintiffs in opposition contend the allegations regarding the appraisal conduct constitute incidental allegations, in order to establish a pattern of conduct intended to delay or withhold benefits due under the policy. Plaintiffs deny any reliance on litigation privilege protected activity as any way integral to the sought after relief.

Code of Civil Procedure section 425.16 provides that “[a] cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States Constitution or California Constitution in connection with a public issue shall be subject to a special motion to strike unless the court determines that the plaintiff has established that there is a probability that the plaintiff will prevail on the claim.” (Code Civ. Proc. § 425.16, subd. (b).) Such a motion involves a two step analysis, in which the court must first determine whether a movant "has made a threshold showing that the challenged cause of action is one arising from protected activity . . . ." (Taus v. Loftus (2007) 40 Cal.4th 683, 712, quoting Equilon Enterprises v. Consumer Cause, Inc. (2002) 29 Cal.4th 53, 67.) If the court so finds, it must then examine whether the respondent has demonstrated a probability of prevailing on the claim. (Taus v. Loftus, supra, 40 Cal.4th at p. 712.)

An act in furtherance of a person's right to petition or free speech under the United States Constitution or California Constitution includes: “(1) any written or oral statement or writing made before a legislative, executive, or judicial proceeding, or any other official proceeding authorized by law, (2) any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law, (3) any written or oral statement or writing made in a place open to the public or a public forum in connection with an issue of public interest, or (4) any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” (Code Civ. Proc., § 425.16.)

The anti-SLAPP applies where the allegations of the defendant’s protected activity are the gravamen or principal thrust of the cause of action. (Peregrine Funding, Inc. v. Sheppard Mulin Richter & Hampton LLP (2005) 133 Cal.App.4th 658, 672 [“‘where a cause of action alleges both protected and unprotected activity, the cause of action will be subject to section 425.16 unless the protected conduct is “merely incidental” to the unprotected conduct’”].) If the allegations of protected activity are only incidental to a claim based essentially on non-protected activity, the mere mention of the protected activity does not subject the claim to an anti-SLAPP motion. (Martinez v. Metabolife International, Inc. (2003) 113 Cal.App.4th 181, 188 [“We conclude it is the principal thrust or gravamen of the plaintiff's cause of action that determines whether the anti-SLAPP statute applies (Citation), and when the allegations referring to arguably protected activity are only incidental to a cause of action based essentially on nonprotected activity, collateral allusions to protected activity should not subject the cause of action to the anti-SLAPP statute”].) .) “[W]hether the defendant's act qualifies as one in furtherance of protected speech or petitioning will depend on whether the defendant took the action for speech-related reasons.” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871, 889.) “[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. (Citation.) Moreover, that a cause of action arguably may have been ‘triggered by protected activity does not entail it is one arising from such. (Citation.) In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity.” (Navellier v. Sletten (2002) 29 Cal.4th 82, 89.) Courts must “draw a careful distinction between a cause of action based squarely on a privileged communication … and one based upon an underlying course of conduct evidenced by the communication.” (White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 888.)

In determining the application of the special motion to strike statute, the court focuses “not on the label of the cause of action,” but on the underlying “activities” alleged in the challenged pleading. (1100 Park Lane Assocs. v. Feldman (2008) 160 Cal.App.4th 1467, 1484.) “If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.” (Baral v. Schnitt (2016) 1 Cal.5th 376, 396.) “[A] plaintiff cannot frustrate the purposes of the SLAPP statute through a pleading tactic of combining allegations of protected and nonprotected activity under the label of one ‘cause of action.’” (Fox Searchlight Pictures, Inc v. Paladino (2001) 89 Cal.App.4th 294, 308.) “The anti-SLAPP statute's definitional focus is not the form of the plaintiff's cause of action but, rather, the defendant's activity that gives rise to his or her asserted liability—and whether that activity constitutes protected speech or petitioning.” (Navellier v. Sletten, supra, 29 Cal.4th 82, 92.)

The Court may look to the litigation privilege as an aid in determining the first step of the anti-SLAPP inquiry. (Flatley v. Mauro (2006) 39 Cal.4th 299, 322-323.) “The anti-SLAPP statute does not apply where protected activity is only collateral or incidental to the purpose of the transaction or occurrence underlying the complaint.” (California Back Specialists Medical Group v. Rand (2008) 160 Cal.App.4th 1032, 1037.) “[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. (Citation.) Moreover, that a cause of action arguably may have been ‘triggered by protected activity does not entail it is one arising from such. (Citation.) In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity.” (Navellier v. Sletten, supra, 29 Cal.4th at p. 89.)

“[T]he mere fact that an action was filed after protected activity took place does not mean the action arose from that activity for the purposes of the anti-SLAPP statute. (Citation.) Moreover, that a cause of action arguably may have been ‘triggered by protected activity does not entail it is one arising from such. (Citation.) In the anti-SLAPP context, the critical consideration is whether the cause of action is based on the defendant's protected free speech or petitioning activity.” (Navellier v. Sletten, supra, 29 Cal.4th at p. 89.) Courts must “draw a careful distinction between a cause of action based squarely on a privileged communication … and one based upon an underlying course of conduct evidenced by the communication.” (White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 888.)

The challenged allegations of the complaint begins with the dispute over the scope and quality of the damages, thereby leading to the appraisal process. Hippo was responsible for the claim adjustment process on behalf of Topa.

As the dispute progressed, Hippo subsequently hired its own counsel for representation in the appraisal process and settlement discussions. The communications were not productive, and Hippo instead demanded an Examination Under Oath (EUO) as a condition of participating in the appraisal process. According to Plaintiffs, the focus of the EUO regarded a prolonged disagreement over tile replacement. The appraisal process eventually occurred and the panel found in favor of Plaintiffs. Defendants also challenge the damages claim. [5:24-28; 6:1-9:18; 11:1-12:17.]

The parties agree that certain alleged underlying conduct, such as the appraisal process itself, constitutes litigation privileged activity. Plaintiffs contend a distinction exists between Plaintiffs’ efforts to recover damages for the wrongful withholding of insurance benefits due under the policy, which insulates the action from any privileged conduct bar.

“Section 1152, subdivision (a), provides that offers of compromise are inadmissible to prove the liability of the offeror for the loss or damage. In insurance litigation, ‘[t]he language of this section does not preclude the introduction of settlement negotiations if offered not to prove liability for the original loss but to prove failure to process the claim fairly and in good faith.’ (Citation.)” (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 915.) Although Defendants challenge the cases as not directly addressing a special motion to strike or the insurer’s right to petition, the court finds the language instructive. The issue is not the content of the settlement offer itself, if any, but the course of conduct presented as alleged indifference towards meaningful negotiations.

In a second case involving alleged bad faith handling of an uninsured motorist claim, a court found the course and conduct of the insurer in no way related to furthering the course and conduct of its rights to petition. “The conduct centers on the delay in responding to and resolving plaintiff's claim. None of this conduct involved [Insurer’s] right to petition. While communications preparatory to bringing (or responding to) an action or arbitration might, under the proper circumstances, be deemed to fall within the scope of section 425.16 (citations), the conduct complained of here does not cross this threshold. The outlined actions (or nonactions) occurred as part of a coverage dispute between an insurer and its insured, and occurred long before any arbitration or other proceeding commenced. (Citation.) ... While ... an insurer is entitled to defend itself against unmeritorious claims, the fact that a dispute exists that might ultimately lead to arbitration does not make every step in that dispute part of a right to petition.” (Beach v. Harco National Ins. Co. (2003) 110 Cal.App.4th 82, 93-94; Miller v. Zurich American Ins. Co. (2019) 41 Cal.App.5th 247, 258-259.)

Again, contrary to the argument in reply, the court finds the cases on-point. While Plaintiffs rely on the appraisal valuation total as a demonstration of the large disparity between the parties’ positions thereby constituting supporting evidence of the wrongfully withheld benefits, the resulting sum in no way necessarily interlinked the entire adjustment process leading up to the privileged appraisal. The course of conduct specifically articulates a separate and distinct course of conduct leading up to the indisputably privileged appraisal. The law and public policy support a finding for a separate and distinct course of unprivileged conduct leading up to the appraisal process itself constituting unprivileged conduct. The cases specifically reject an insurer’s right to incorporate non-privileged conduct under the guise of the right to petition as a means of thwarting potential bad faith claims.

The extensive case law on both the general subject and specific case regarding insurance bad faith causes of action therefore categorically leads to the conclusion of a failure to shift the burden as to the first prong by Topa. The insurer, however, also raised a valid argument regarding the distinction in bad faith claims as to adjusters on which Plaintiffs present no apparent opposition.

An insurance adjuster in no way participates in the contractual relationship between the parties. (Henry v. Associated Indemnity Corp. (1990) 217 Cal.App.3d 1405, 1416.) Again, the conduct of Hippo itself leading up to the appraisal was by no means privileged conduct.

While Hippo is named in all causes of action, the scope of the motion requires a finding of privileged conduct barring all claims. Consideration of the validity of the claims based on the entitlement to seek damages against a non-contracting party requires a finding beyond the scope of the subject motion. The court motion is therefore denied as to this separate argument regarding the Hippo as a proper to any and all claims in its role as adjuster to Topa.

Finally, to the extent the second prong of the test depends on the litigation privilege barring all claims, the court finds the litigation privilege inapplicable to the subject cased based on the relied upon authority in the first section. [See Declaration of Alex Cohen.] The motion is therefore DENIED in its entirety as to both defendants.

Any counter motion for attorney fees by Plaintiffs must be filed in a separate noticed motion. [See Declaration of Sara McClain.]

Demurrer to the complaint scheduled for July 23, 2024.

Defendants to provide notice.